Inflation is raging and close to 8.5%, but peaking as per Yellen and ECB. Most of the market downturn is attributed to war in Ukraine, supply chain bottleneck, Covid surge in china and cheap liquidity available in the capital markets today.
Growth stocks are bottoming out, what's the evidence behind this thesis ?
Tremendous negativity and sell everything mentality among retail investors, fear is at all time high. Low volatility showing that institutional selling is limited . Most of the recent growth sector reports such as Tesla, IBM, SNAP has been received with muted responses. Slight disappointments such as Netflix subscription numbers wiped out 50 billion USD in one trading session and still going down.
Tesla posted great numbers and how its circumventing supply chain issues with ease. The response to the earnings is 1 % move up vs 10 % during post covid recovery rallies.
Taiwan semiconductor being the backbone of chip industry posted blowout results and the stock is down 5% from its pre earnings stock price.
I think the inflation fears are overblown and temporary . The market is overpricing/overcorrecting to downside to keep up with the potential recession and very aggressive fed interest hikes.
Value stocks are showing signs of exhaustion and overbought conditions . Take Walmart and J&J for example, both have hit 52 week highs with low average volume.
The best approach is to turn off the noise in the Analyst predictions and focus on long term growth, value and dividend players.
My shopping list includes rotating into low PE/higher growth stocks and dividend players. Some of them i have listed in the earlier posts including
Value stocks(low P/E): MU,IBM,FB,GOOG,GILD and BJ
Dividend stocks : Shipping companies such DSX, GOGL,KNOP > 15% plus dividends
High Risk/Reward Plays : TESLA,NVDA,AMD,MSFT > 20 % Growth
More shopping list in coming weeks while market is adjusting to peaking inflation and aggressive rate hikes. I expect market to bottom in May (sell in may and go away doesn't apply anymore).
